Economic Review

1990

Sep/Oct, 1990

Interest Rate Expectations and the Slope of the Money Market Yield Curve

An examination of the relationship between yield and maturity in the money market. The expectations theory suggests that the yield curve should be a good predictor of future spot interest rates. A substantial body of research in recent years has tested this implication of the theory and discussed possible reasons for the lack of support for the theory from these tests. This paper provides a review of this literature.